People who get Social Security will finally find out about their new cost-of-living adjustment (COLA) check increase in less than two weeks. However, most people are worried about whether this increase will be enough to cover their living costs.
One of the most important and expensive jobs of the federal government is to run Social Security. There are 68 million Americans who get payments from the Social Security Administration (SSA).
Fifty million of them are retired workers who get nearly $1.5 trillion a year. About 13% of beneficiaries depend on their SSA payments for almost all of their income, and more than 40% of these retirees depend on them for at least half of their income.
Social Security beneficiaries will know the official COLA increase in October
Whether your Social Security payments are a big part of your retirement or not, you may be worried about how inflation will affect them. If your costs go up, will you have to cut back?
The Social Security Administration (SSA) makes changes to benefits every year to keep up with rising costs and make sure that seniors can continue to live easily. When people retire, they get a big check every year called the cost-of-living increase (COLA).
There were times when Congress had to agree to any changes to Social Security payouts in the early years. For a long time, nothing changed, and there were nonstop political fights. Retirees today are lucky that an automatic change was put in place in 1975.
Since then, benefits have gone up a little for almost everyone every year. This COLA is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is a measure of inflation. The U.S. Bureau of Labor Statistics (BLS) figures out this CPI-W number and sends it out every month.
The BLS uses a lot of different types of data to try to figure out what inflation is across the whole economy and round it down to a single number. It has been used regularly for more than 50 years, but some people question whether it is the best indicator and how well it shows how much seniors’ costs have gone up.
Americans still battling coronavirus inflation
Some of the worst inflation caused by the coronavirus pandemic has gone down over the past year, but it is still hurting a lot of Americans. It got to amounts that hadn’t been seen or heard of in decades in 2021 and 2022. Because of this, the changes to Social Security for 2021 and 2022 showed COLAs of 5.9% and 8.7%, respectively.
Since the early 1980s, these were the biggest. Even though these changes look good, the CPI-W might not be the best way to measure them. It’s meant to keep an eye on how young people who are still working act.
However, retirees have different wants and needs when it comes to spending money. One of the biggest differences may be in the level of medical care. This is a bigger chunk of a retiree’s budget, and inflation is often higher here than elsewhere in the economy.
But it’s important to know that the CPI-W doesn’t take these kinds of differences into account. So, even with the annual COLA, seniors may not be able to buy as much.
The most current study by The Senior Citizens League (TSCL) shows that seniors’ ability to buy things with their Social Security benefits has gone down by 20% since 2010.
If TSCL is right, the CPI increase that’s coming won’t likely be enough to make up for the lost buying power. Still, any rise is better than none. When will we know the change for 2025? The exact number won’t be out until the annual COLA comes out in October.
The CPI-W statistics from July, August, and September will be used to figure it out, though. Since two of those numbers have already been made public, we can pretty much be sure of the third.
The most recent prediction from TSCL is 2.5%, which is less than last year’s 3.2%. The real number won’t come out for a while longer than this guess, but it will come out soon enough.